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New Provisions and Strategies for Charitable Giving in 2019

The Tax Cuts and Jobs Act, signed into law on December 22, 2017 includes several changes that will affect charitable giving. Among these are:

  • The gift, estate and generation-skipping tax credits will shelter gifts and estates up to $11.4 million in 2019 (adjusted for inflation).

  • The deduction limit for cash gifts to charity is increased from 50% of adjusted gross income to 60%.

  • The 80% charitable deduction allowed for payments for the right to purchase tickets to athletic events at colleges and universities is repealed.

Here are some charitable giving strategies to consider:

1. Qualified charitable distributions (QCDs) from IRAs are advantageous for eligible donors. Although no charitable deduction is available, the income tax that is normally owed on withdrawals is avoided. In addition, because QCDs can satisfy required minimum distributions, income tax savings can be realized. QCD rules:

  • Donors must be at least age 70½ on the date of the gift.

  • QCDs can come only from IRAs and Roth IRAs, not 401(k)s, 403(b)s, pension plans or other retirement accounts.

  • A maximum of $100,000 may be given annually.

  • The transfer must come directly from the IRA custodian.

  • QCDs can be made only to public charities, not to private foundations or donor advised funds.

  • Distributions can be used to satisfy a donor’s pledge.

2. Life-income gifts such as charitable remainder trusts and charitable gift annuities offer several advantages to satisfy philanthropic goals.  Because deductions for remainder trusts and gift annuities tend to be larger, donors may be able to itemize in the year a gift is arranged.  Payments from life-income gifts may be attractive to donors who would normally make bequests to charity through a will or living trust, providing income tax, and possibly capital gains tax, savings.

3. Making gifts of highly appreciated assets allows donors to avoid the capital gains tax that would be due if the assets were sold, offering tax savings even if the taxpayer uses the standard deduction.

4. Those with donor advised funds can direct gifts to public charities. A donor may be able to itemize by making a larger gift to a donor advised fund, from which annual gifts can be made over several years.  Contributing appreciated securities to a donor advised fund provides added tax savings.